Cool Poland “that happy isle that wants to stay away from the euro.”

As published in La Repubblica, translated from Italian by Ugo Rotellini

MANY YEARS OF RECORD GROWTH HAS MADE IT THE FIRST POST-SOVIET ECONOMY: NOW WARSAW IS SLOWING BUT REMAINS IN A POSITIVE SITUATION. THE PROBLEM IS THAT IT STILL DEPENDS ON THE VITALITY OF THE EURO ZONE.
Andrea Tarquini

Warsaw: you see the skyline from a distance, as the LOT jet begins its descent. And it makes you think of a Miami that’s come in from the cold. The airport is very modern, the suitcase comes immediately. On the street there’s a well-dressed middle class, many young people, and new cars. Only the grey apartment blocks from the communist era remind you that we are in east-central Europe, but there is the feeling that, considering past differences, they are doing far better than us. At least until it lasts, because even here, the long wave of the eurozone crisis has arrived, dramatically slowing GDP growth. However, despite all this it is still growing, far from our recession. Welcome to Cool Poland – that was the headline in the Wall Street Journal a few days ago.

Poland is the biggest eastern economy of the European Union, the country where the fall of the Berlin Wall began. It remains, from demographic, political and military perspectives number one in its region, a Little Germany or second economic engine, and even as it takes hits from the economic storm, it still thrives. That this is the case, can be seen in the city center, with its skyscrapers, (missing in Prague, Budapest or Vienna), and its large shopping centres. Or through the young energetic vibe of Warsaw, full of trendy bars, and restaurants and clubs where you can watch the sunrise, even after a day of hectic trading on the Stock Exchange, housed in a building which was the former communist Central Committee headquarters. It is the most important exchange in Eastern Europe, controlling the Ukrainian one and currently negotiating from a position of strength for a merger with the Austrians. On its ground floor, there is a subsidiary of Ferrari.

According to the young emerging architect, Jakub Szczesny, there’s something of the new reunified Berlin, a desire to start again from scratch, even coexisting with the deficiencies or negative aspects of life inherited from the recent Cold War past. Perhaps only in Berlin or London do you find so many enterprising entrepreneurs, investors and hard-working young people. And even if after the revolution two million young Poles, whether qualified or not, found their fortune in the UK, Germany or Switzerland, Warsaw, like other Polish cities, has also become a magnet for new immigrants. There are young graduates from southern Europe, an area crushed by debt, recession and austerity, Ukrainians and others from the former Soviet Union, and even Vietnamese taking on the most menial jobs. It takes a lot to identify any indicators of a slowdown in Poland, which according to Adam Michnik (one of the key leaders of the 1989 revolution), is better off today than than at any time in the last 400 years. The memory of widespread poverty, rationing and 2200% inflation in the last years of the socialist era is fading. However, both the Central Bank and the Ministry of Economy, warn that the slowing economy is being strongly felt. The growth of gross domestic product is no longer almost Chinese in scope, when rates between 5 and 6% were common after joining the European Union. In 2011 it was still at 4%, last year it slowed to just over 2%, and for this year an even more modest 1.5% is expected. And unemployment is back up to 14% (a statistic influenced by seasonal factors including a harsh winter blocking construction).

It’s also inevitable that since Poland’s main economic and trade partners such as Germany and Italy are in the eurozone, that if these large economies catch cold, at the very least Poland will sneeze. But let’s face it, an increase of 1.5% in the current year would be a dream result not only for Italians and the French, but even the Germans. Given that much if not all will depend on the future of the eurozone, the challenge facing the liberal government of Prime Minister Donald Tusk is to grasp this moment as a last opportunity to initiate new reforms, and make the country more competitive, remembering that it’s a year and a half to the next general elections, when after two terms the current government will face the national conservatives of Jaroslaw Kaczynski. “We’re following hot on the heels of Europe’s most advanced societies,” Tusk has often said to Angela Merkel. We have to keep advancing. Health care and pension reform (changes have already begun such as increasing the working age), prudent choices with respect to public spending, but at the same time major infrastructure modernization, including rail and expressways. More investment in advanced technology sectors, closer links between scientific research and companies as is already happening in technology parks around Krakow. This is what the country needs. And then, with a saturated domestic market after years of strong demand, it must continue to export more industrial products (such as modern buses servicing German cities), auto, mechanical and electronic components for the aerospace industry. Further competitive devaluation of the zloty to the euro is difficult: there is little room to manouver.

Dangers and pitfalls are there, from the difficulty of getting people to accept new sacrifices, to the unknown of Europe’s future. Less and less people are now convinced about the government’s pursuit of entry into the eurozone. People fear news from the west more that many of the country’s internal difficulties. However the basic economic data remains impressive: deficit still only at 5% of GDP (primarily because of heavy investments in 2008-09), an enviable public debt at just 55.8%. Dear ‘cool Poland’, the road is uphill even for you, but many in the west still envy you. The Polish Prime Minister Donald Tusk is following a course of ever increasing structural reforms. A Volvo bus factory in Wroclaw, where from next June the Swedish carmaker will focus the production of its “trucks” division for all of Europe, including Scandinavia. From the data we can see the continuous growth in Poland, even if at a slower rate in recent times.